Aid Effectiveness—Opening the Black Box

Abstract

The empirical literature on aid effectiveness has yielded unclear and ambiguous results. This is not surprising given the heterogeneity of aid motives, the limitations of the tools of analysis, and the complex causality chain linking external aid to final outcomes. The causality chain has been largely ignored and as a consequence the relationship between aid and development has been mostly handled as a kind of 'black box'. Making further progress on aid effectiveness requires opening that box. This paper examines the causality chain linking aid flows to development outcomes. It argues that many of the questions that policy makers and economists would like to squeeze data into answering simply cannot be answered due to the complexity and 'noise' along links in the chain, and hence the problem of attribution. It then examines what is known about aid effectiveness along different links in the causality chain.Finally, it turns to recent trends in the way aid is delivered and the new model that appears to be emerging.

Taxation, Political Accountability and Foreign Aid: Lessons from Somaliland

“…As previously noted, some econometric studies have suggested that foreign aid flows may be large enough to have a significant effect on political accountability in recipient countries (Brautigam and Knack 2004;Djankov, Montalvo, and Reynal-Querol 2005), but the econometric devices these studies employ are not widely accepted by critics (Bourguignon and Sundberg 2007).…”

Determinants of Financial Independence in Developing Countries (A Case Study of Kenya)

“…Further studies lead to an emerging consensus that, at best, there appears to be a small positive, but insignificant, impact of aid on growth (Bourguignon and Sundberg, 2007).…”

Social Representations of Foreign Aid: Exploring Meaning-Making in Aid Practice in Sulu, Southern Philippines

“…Similarly, investigations conducted about the impact or outcomes of aid have also mainly focused on the analysis of structural variables, such as economic growth and development, delivery of basic services, the prevalence of corruption and conflict, and certain improvements in security and governance (Gulrajani, 2011;Tandon, 2009;Easterly, 2006;Radelet, 2006;Pankaj, 2005;UNDP, 2005;Hunt, 2004). Finally, research studies about aid effectiveness have also analysed the relationship of different structural variables, such as democratic governance, good economic policies, and civil and political rights, to certain developmental goals (Bearce & Tirone, 2010;Bourguignon & Sundberg, 2007;Burnside & Dollar, 2000;Svensson, 1999). More importantly, research studies on the determinants, outcomes and effectiveness of aid have yielded mixed and contested results about foreign aid, thus highlighting the controversial nature of this specific social object.…”